VEON – Transition from telco to consumer IP communications platform

Introduction to Veon

Geographical footprint and brands

Veon came into being at the start of 2017, a rebrand of VimpelCom. The Amsterdam-based telco was founded in its current form in 2009 when shareholders Telenor and Alfa agreed to merge their assets in VimpelCom and Ukraine’s Kyivstar to create VimpelCom Ltd.

Veon is among the world’s 10 largest communications network operators by subscription, with around 235 million customers in 13 countries (see Figure 1).

Figure 1: Veon’s geographical footprint (September 2017)

Source: Veon, STL Partners

The telco operates a number of brands across its geographical footprint (see Figure 2).

Figure 2: Veon’s brands (September 2017)

Source: Veon, STL Partners

Veon’s largest market is Russia, where it has over 58 million mobile subscribers, making up 24% of its global total. Pakistan and Bangladesh comprise its second-largest markets by subscribers, while it has over 30 million customers in Italy under its Wind Tre brand, a joint venture with CK Hutchison (see Figure 3).

Figure 3: Veon mobile customers by region, H2 2017 (millions)

Source: Veon, STL Partners

A brief history of Veon

  • 1992: Veon began life as Russian operator PJSC VimpelCom in 1992.
  • 2009: VimpelCom Ltd. founded as Telenor and Alfa Group (Altimo) agree to merge their assets in VimpelCom (Russia and CIS) and Ukraine (Kyivstar).
  • 2010: VimpelCom acquires Orascom Telecom Holding (operating in Pakistan, Bangladesh, Algeria) and Wind Italy from Egypt’s Naguib Sawiris.
  • 2017: VimpelCom Ltd. rebrands as Veon.

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The somewhat unusual development of both Veon’s shareholder structure and geographical footprint means the telco faces some unique challenges, but has also enabled a degree of flexibility in the company’s path to transformation.

Veon’s shareholder structure – an enabler of transformation

At the time of writing, Veon is 47.9%-owned (common and voting shares) by Alfa (via investment vehicle LetterOne), and 19.7% by Norway’s Telenor (with the remaining 32.4% split between free float and minority shareholders).

This structure means that the company is less beholden to dividend-hungry shareholders, allowing the telco more ease of alignment than many of its contemporaries. This extra “breathing space” also allows change to occur faster with fewer levels of managerial approval required, whilst the board of directors has given its backing to Veon’s transformation journey, offering full “top-down support”. Nevertheless there is some doubt about how the transformation plans will be greeted at local OpCo level, and the group faces some serious cultural challenges in this area.

Faced with lacklustre organic growth and in the face of headwinds of currency devaluations in its former Soviet markets, Veon has chosen to, in the words of CEO Jean-Yves Charlier, “disrupt itself from within”.

Reversing the revenue decline

Speaking at Veon’s rebrand in February 2017, CEO Charlier spoke of how the telco sector has been backed into a corner by aggressive disruptive start-ups like Skype and WhatsApp, meaning the industry now needs to reinvent itself and find new paths to growth.

The company began by improving its capital structure, in part through the consolidation of operations in two of its largest markets, with the mergers of Mobilink and Warid to form Jazz in Pakistan, and the formation of joint venture Wind Tre from Wind Italy and CK Hutchison’s Tre (3).

Veon states it has realigned its corporate culture and values, introduced a robust control and compliance framework, and significantly cut its cost base, and the operator returned to positive revenue and EBITDA growth in the second quarter of 2017.

Contents:

  • Executive Summary 
  • Introduction to Veon
  • Veon’s digital strategy
  • What are the strengths of Veon’s offering?
  • What must Veon do to succeed?
  • Will Veon make it work?
  • Introduction
  • Introduction to Veon
  • The path to total transformation
  • Veon’s digital strategy
  • Reinvent customer experience
  • Network virtualisation
  • The product
  • An omni-channel platform
  • The strengths of the holistic platform
  • Can Veon’s consumer IP communications proposition succeed? 
  • Can Veon beat the GAFA and Chinese giants to the market?
  • What must Veon do to succeed?
  • Conclusions

Figures:

  • Figure 1: Veon’s geographical footprint (September 2017)
  • Figure 2: Veon’s brands (September 2017)
  • Figure 3: Veon mobile customers by region, H2 2017 (millions)
  • Figure 4: Veon revenue and EBITDA, Q4 2015-Q2 2017 ($ billion)
  • Figure 5: Veon’s transformation from telco to tech company
  • Figure 6: Penetration of leading social networks in Russia (2016)
  • Figure 7: Veon IT stack scope of responsibilities
  • Figure 8: VEON app screenshots – a IP communication platform
  • Figure 9: Veon app access requirements
  • Figure 10: Comparison of consumer IP communications plays
  • Figure 11: Veon – a SWOT analysis

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Apple’s pivot to services: What it means for telcos

Introduction

The latest report in STL’s Dealing with Disruption stream, this executive briefing considers Apple’s strategic dilemmas in its ongoing struggle for supremacy with the other major Internet ecosystems – Amazon, Facebook and Google. It explores how the likely shift from a mobile-first world to an artificial-intelligence first world will impact Apple, which owes much of its current status and financial success to the iPhone.

After outlining Apple’s strategic considerations, the report considers how much Apple earns from services today, before identifying Apple’s key services and how they may evolve. Finally, the report features a SWOT (strengths, weaknesses, opportunities and threats) analysis of Apple’s position in services, followed by a TOWS analysis that identifies possible next steps for Apple. It concludes by considering the potential implications for Apple’s main rivals, as well as two different kinds of telcos – those who are very active in the service layer and those focused on providing connectivity and enablers.

Several recent STL Partners’ research reports make detailed recommendations as to how telcos can compete effectively with the major Internet ecosystems in the consumer market for digital services. These include:

  • Telco-Driven Disruption: Will AT&T, Axiata, Reliance Jio and Turkcell succeed? To find new revenues, some telcos are competing head-on with the major internet players in the digital communications, content and commerce markets. Although telcos’ track record in digital services is poor, some are gaining traction. AT&T, Axiata, Reliance Jio and Turkcell are each pursuing very different digital services strategies, and we believe these potentially disruptive moves offer valuable lessons for other telcos and their partners.
  • Consumer communications: Can telcos mount a comeback? The rapid growth of Facebook, WhatsApp, WeChat and other Internet-based services has prompted some commentators to write off telcos in the consumer communications market. But many mobile operators retain surprisingly large voice and messaging businesses and still have several strategic options. Indeed, there is much telcos can learn from the leading Internet players’ evolving communications propositions and their attempts to integrate them into broad commerce and content platforms.
  • Autonomous cars: Where’s the money for telcos? The connected car market is being seen as one of the most promising segments of the Internet of Things. Everyone from telcos to internet giants Google, and specialist service providers Uber are eyeing opportunities in the sector. This report analyses 10 potential connected car use-cases to assess which ones could offer the biggest revenue opportunities for operators and outline the business case for investment.
  • AI: How telcos can profit from deep learning Artificial intelligence (AI) is improving rapidly thanks to the growing use of deep neural networks to teach computers how to interpret the real world (deep learning). These networks use vast amounts of detailed data to enable machines to learn. What are the potential benefits for telcos, and what do they need to do to make this happen?
  • Amazon: Telcos’ Chameleon-King Ally? New digital platforms are emerging – the growing popularity of smart speakers, which rely on cloud-based artificial intelligence, could help Amazon, the original online chameleon, to bolster its fast-evolving ecosystem at the expense of Google and Facebook. As the digital food chain evolves, opportunities will open up for telcos, but only if the smart home market remains heterogeneous and very competitive.

Apple’s evolving strategy

Apple is first and foremost a hardware company: It sells physical products. But unlike most other hardware makers, it also has world-class expertise in software and services. These human resources and its formidable intellectual property, together with its cash pile of more than US$250 billion and one of the world’s must coveted brands, gives Apple’s strategic options that virtually no other company has. Apple has the resources and the know-how to disrupt entire industries. Apple’s decision to double the size of it’s already-impressive services business by 2021 has ramifications for companies in a wide range of industries – from financial services to entertainment to communications.

Throughout its existence, Apple’s strategy has been to use distinctive software and services to help sell its high-margin hardware, rather than compete head-on with Google, Facebook, Microsoft and Amazon in the wider digital services and content markets. As Apple’s primary goal is to create a compelling end-to-end solution, its software and services are tightly integrated into its hardware. Although there are some exceptions, notably iTunes and Apple Music, most of Apple’s services and software can only be accessed via Apple’s devices. But there are four inter-related reasons why Apple may rethink that strategy and extend Apple’s services beyond its hardware ecosystem:

      • Services are now Apple’s primary growth engine, as iPhone revenue appears to have peaked and new products, such as the Apple Watch, have failed to take up the slack. Moreover, services, particularly content-based services, need economies of scale to be cost-effective and profitable.
      • Upstream players, such as merchants, brands and content providers, want to be able to reach as many people as possible, as cost-effectively as possible. They would like Apple’s stores and marketplaces to be accessible from non-Apple devices, as that would enable them to reach a larger customer base through a single channel. Figure 1 shows that Apple’s iPhone ecosystem (which use the iOS operating system) is approximately one quarter of the size of rival Android in terms of volumes.
      • Artificial intelligence is becoming increasingly central to the propositions of the major Internet ecosystems, including that of Apple. The development of artificial intelligence requires vast amounts of real-world data that can be used to hone the algorithms computers use to make decisions. To collect the data necessary to detect patterns and subtle, but significant, differences in real-world conditions, the Internet players need services that are used by as many people as possible.
      • As computing power and connectivity proliferates, the smartphone won’t be as central to people’s lives as it is today. For Apple, that means having the best smartphone won’t be enough: Computing will eventually be everywhere and will probably be accessed by voice commands or gestures. As the hardware fades into the background and Apple’s design skills become less important, the Cupertino company may decide to unleash its services and allow them to run on other platforms, as it did with iTunes.

Content:

  • Executive Summary
  • Introduction
  • Apple’s evolving strategy
  • Playing catch-up in artificial intelligence
  • What does Apple earn from services?
  • What are Apple’s key services?
  • Communications – Apple iMessage and FaceTime
  • Commerce – Apple Pay and Apple Wallet
  • Content – iTunes, Apple Music, Apple TV
  • Software – the App Store, Apple Maps
  • Artificial intelligence and the role of Siri
  • Tools for developers
  • Conclusions and implications for rivals
  • Implications for rivals

Figures:

  • Figure 1: Installed base of smartphones by operating system
  • Figure 2: Apple’s artificial intelligence, as manifest in Siri, isn’t that smart
  • Figure 3: Apple’s services business is comparable in size to Facebook
  • Figure 4: The services business is Apple’s main growth engine
  • Figure 5: The strength of Apple’s online commerce ecosystem
  • Figure 6: iMessage is becoming a direct competitor to Instagram and WhatsApp
  • Figure 7: Various apps allow consumers to make payments via Apple Pay
  • Figure 8: Apple Pay is available in a limited number of markets
  • Figure 9: Unlike most Apple services, Apple Music is “available everywhere”
  • Figure 10: Apple’s App Store generates far more revenue than Google Play
  • Figure 11: Apple Maps’ navigation trailed well behind Google Maps in June 2016
  • Figure 12: SWOT analysis of Apple in the services sector
  • Figure 13: TOWS analysis for Apple in the service market

B2B growth: How can telcos win in ICT?

Introduction

The telecom industry’s growth profile over the last few years is a sobering sight. As we have shown in our recent report Which operator growth strategies will remain viable in 2017 and beyond?, yearly revenue growth rates have been clearly slowing down globally since 2009 (see Figure 1). In three major regions (North America, Europe, Middle East) compound annual growth rates have even been behind GDP growth.

 

Figure 1: Telcos’ growth performance is flattening out (Sample of sixty-eight operators)

Source: Company accounts; STL Partners analysis

To break out of this decline telcos are constantly searching for new sources of revenue, for example, by expanding into adjacent, digital service areas which are largely placed within mass consumer markets (e.g. content, advertising, commerce).

However, in our ongoing conversations with telecoms operators, we increasingly come across the notion that a large part of future growth potential might actually lie in B2B (business-to-business) markets and that this customer segment will have an increasing impact of overall revenue growth.

This report investigates the rationale behind this thinking in detail and tries to answer the following key questions:

  1. What is the current state of telco’s B2B business?
  2. Where are the telco growth opportunities in the wider enterprise ICT arena?
  3. What makes an enterprise ICT growth strategy difficult for telcos to execute?
  4. What are the pillars of a successful strategy for future B2B growth?

 

  • Executive Summary
  • Introduction
  • Telcos may have different B2B strategies, but suffer similar problems
  • Finding growth opportunities within the wider enterprise ICT arena could help
  • Three complications for revenue growth in enterprise ICT
  • Complication 1: Despite their potential, telcos struggle to marshal their capabilities effectively
  • Complication 2: Telcos are not alone in targeting enterprise ICT for growth
  • Complication 3: Telcos’ core services are being disrupted by OTT players – this time in B2B
  • STL Partners’ recommendations: strategic pillars for future B2B growth
  • Conclusion

 

  • Figure 1: Telcos’ growth performance is flattening out (Sample of sixty-eight operators)
  • Figure 2: Telcos’ B2B businesses vary significantly by scale and performance (selected operators)
  • Figure 3: High-level structure of the telecom industry’s revenue pool (2015) – the consumer segment dominates
  • Figure 4: Orange aims to expand the share of “IT & integration services” in OBS’s revenue mix
  • Figure 5: Global enterprise ICT expenditures are projected to growth 7% p.a.
  • Figure 6: Telcos and Microsoft are moving in opposite directions
  • Figure 7: SD-WAN value chain
  • Figure 8: Within AT&T Business Solutions’ revenue mix, growth in fixed strategic services cannot yet offset the decline in legacy services

Telstra: Battling Disruption and Growing Enterprise Cloud & ICT

Introduction

A Quick Background on the Australian Market

Australia’s incumbent telco is experiencing the same disruptive forces as others, just not necessarily in the same way. Political upheaval around the National Broadband Network (NBN) project is one example. Others are the special challenges of operating in the outback, in pursuit of their universal service obligation, and in the Asian enterprise market, at the same time. Telstra’s area of operations include both some of the sparsest and some of the densest territories on earth.

Australian customers are typically as digitally-literate as those in western Europe or North America, and as likely to use big-name global Web services, while they live at the opposite end of the longest submarine cable runs in the world from those services. For many years, Telstra had something of a head start, and the cloud and data centre ecosystem was relatively undeveloped in Australia, until Amazon Web Services, Microsoft Azure, and Rackspace deployed in the space of a few months presenting a first major challenge. Yet Telstra is coping.

Telstra: doing pretty well

Between H2 2009 and H2 2014 – half-yearly reporting for H1 2015 is yet to land – top-line revenue grew 1% annually, and pre-tax profits 3%. As that suggests, margins have held up, but they have only held up. – Net margin was 16% in 2014, while EBITDA margin was 43% in 2009 and 41% in 2014, having gone as low as 37% in H2 2010. This may sound lacklustre, but it is worth pointing that Verizon typically achieves EBITDA margins in this range from its wireless operation alone, excluding the commoditised and capital-intensive landline business. Company-wide EBITDA margins in the 40s are a sound performance for a heavily regulated incumbent. Figure 1 shows sales, EBITDA and net margins, and VZW’s last three halves for comparison.

Figure 1: Telstra continues to achieve group-wide EBITDA margins like VZW’s

Source: STL Partners, Telstra filings

Looking at Telstra’s major operating segments, we see a familiar pattern. Fixed voice is sliding, while the mobile business has taken over as the core business. Fixed data is growing slowly, as is the global carrier operation, while enterprise fixed is declining slowly as the traditional voice element and older TDM services shrink. On the other hand, “Network Applications & Services” – Telstra’s strategic services group capturing new-wave enterprise products and the cloud – is growing strongly, and we believe that success in Unified Communications and Microsoft Office 365 underpins that growth in particular. A one-off decrease since 2009 is that CSL New World, a mobile network operator in Hong Kong, was sold at the end of 2014.

Figure 2: Mobile and cloud lead the way

Source: STL Partners, Telstra filings

Telstra is growing some new Telco 2.0 revenue streams

Another way of looking at this is to consider the segments in terms of their size, and growth. In Figure 2, we plot these together and also isolate the ‘Telco 2.0’ elements of Telstra from the rest. We include the enterprise IP access, Network Applications & Services, Pay-TV, IPTV, and M2M revenue lines in Telco 2.0 here, following the Telco 2.0 Transformation Index categorisations.

Figure 3: Telco 2.0 is a growing force within Telstra

Source: STL Partners, Telstra filings

The surge of mobile and the decline of fixed voice are evident. So is the decline of the non-Telco 2.0 media businesses – essentially directories. This stands out even more so in the context of the media business unit.

Figure 4: Telstra’s media businesses, though promising, aren’t enough to replace the directories line of business

Source: STL Partners, Telstra filings

“Content” here refers to “classified and advertising”, aka the directory and White Pages business. The Telco 2.0 businesses, by contrast, are both the strongest growth area and a very significant segment in terms of revenue – the second biggest after mobile, bigger even than fixed voice, as we can see in Figure 5.

Figure 5: Telco 2.0 businesses overtook fixed voice in H2 2014

Source: STL Partners, Telstra filings

To reiterate what is in the Telco 2.0 box, we identified 5 sources of Telco 2.0 revenue at Telstra – pay-TV, IPTV, M2M, business IP access, and the cloud-focused Network Applications & Services (NA&S) sub-segment. Their performance is shown in Figure 6. NA&S is both the biggest and by far the fastest growing.

 

  • Executive Summary
  • Introduction
  • A quick background on the Australian Market
  • Telstra: doing pretty well
  • Telstra is growing some new Telco 2.0 revenue streams
  • Cloud and Enterprise ICT are key parts of Telstra’s story
  • Mobile is getting more competitive
  • Understanding Australia’s Cloud Market
  • Australia is a relatively advanced market
  • Although it has some unique distinguishing features
  • The Australian Cloud Price Disruption Target
  • The Healthcare Investments: A Big Ask
  • Conclusions and Recommendations

 

  • Figure 1: Telstra continues to achieve group-wide EBITDA margins like VZW’s
  • Figure 2: Mobile and cloud lead the way
  • Figure 3: Telco 2.0 is a growing force within Telstra
  • Figure 4: Telstra’s media businesses, though promising, aren’t enough to replace the directories line of business
  • Figure 5: Telco 2.0 businesses overtook fixed voice in H2 2014
  • Figure 6: Cloud is the key element in Telstra’s Telco 2.0 strategy
  • Figure 7: NA&S is by far the strongest enterprise business at Telstra
  • Figure 8: Enterprise fixed is under real competitive pressure
  • Figure 9: Telstra Mobile subscriber KPIs
  • Figure 10: Telstra Mobile is strong all round, but M2M ARPU is a problem, just as it is for everyone
  • Figure 11: Australia is a high-penetration digital market
  • Figure 12: Australia is a long way from most places, and links to the Asia Pacific Cable Network (APCN) could still be better
  • Figure 13: The key Asia Pacific Cable Network (APCN) cables
  • Figure 14: Telstra expects rapid growth in intra-Asian trade in cloud services
  • Figure 15: How much?
  • Figure 16: A relationship, but a weak one – don’t count on data sovereignty

Telco 1.0: Death Slide Starts in Europe

Telefonica results confirm that global telecoms revenue decline is on the way

Very weak Q1 2014 results from Telefonica and other European players 

Telefonica’s efforts to transition to a new Telco 2.0 business model are well-regarded at STL Partners.  The company, together with SingTel, topped our recent Telco 2.0 Transformation Index which explored six major Communication Service Providers (AT&T, Verizon, Telefonica, SingTel, Vodafone and Ooredoo) in depth to determine their relative strengths and weaknesses and provide specific recommendations for them, their partners and the industry overall.

But Telefonica’s Q1 2014 results were even worse than recent ones from two other European players, Deutsche Telekom and Orange, which both posted revenue declines of 4%.  Telefonica’s Group revenue came in at €12.2 billion which was down 12% on Q1 2013.  Part of this was a result of the disposal of the Czech subsidiary and weaker currencies in Latin America, in which around 50% of revenue is generated.  Nevertheless, the negative trend for Telefonica and other European players is clear.

As the first chart in Figure 1 shows, Telefonica’s revenues have followed a gentle parabola over the last eight years.  They rose from 2006 to 2010, reaching a peak in Q4 of that year, before declining steadily to leave the company in Q1 2014 back where it started in Q1 2006.

The second chart, however, adds more insight.  It shows the year-on-year percentage growth or decline in revenue for each quarter.  It is clear that between 2006 and 2008 revenue growth was already slowing down and, following the 2008 economic crisis in which Spain (which generates around quarter of Telefonica’s revenue) was hit particularly hard, the company’s revenue declined in 2009.  The economic recovery that followed enabled Telefonica to report growth again in 2010 and 2011 before the underlying structural challenges of the telecoms industry – the decline of voice and messaging – kicked in, resulting in revenue decline since 2012.

Figure 1: Telefonica’s growth and decline over the last 8 years

Telco 2.0 Telefonica Group Revenue

Source: Telefonica, STL Partners analysis

One thing is clear: the only way is down for most CSPs and for the industry overall

The biggest concern for Telefonica and something that STL Partners believes will be replicated in other CSPs over the next few years is the accelerating nature of the decline since the peak.  It seems clear that Telco 1.0 revenues are not going to decline in a steady fashion but, once they reach a tipping point, to tumble away quickly as:

  • Substitute voice and messaging products and alternate forms of communication scale;
  • CSPs fight hard to maintain customers, revenue and share in voice, messaging and data products, via attractive bundles

The results of the European CSPs confirms STL Partners belief that the outlook for the global industry in the next few years is negative overall.  It is clear that telecoms industry maturity is at different stages globally:

  • Europe: in decline
  • US: still growing but very close to the peak
  • Africa, Middle East, Latin America: slowing growth but still 2(?) years before peak
  • Asia: mixed, some markets growing, others in decline

Given these different mixes, STL Partners reaffirms its forecast of 2012 that overall the industry will contract by up to 10% between 2013 and 2017 as core Telco 1.0 service revenue decline accelerates once more and more countries get beyond the peak.  This is illustrated for the mobile industry in Figure 2, below.

Figure 2: Near-term global telecoms decline is assured; longer-term growth is dependent on management actions now

Global mobile telcoms revenue

Source: STL Partners

Upturn in telecoms industry fortunes after 2016 dependent on current activities

If the downturn to 2016 is a virtual certainty, the shape of the recovery beyond this, which STL Partners (tentatively) forecasts, is not. The industry’s fortunes could be much better or worse than the forecast owing to the importance of transformation activities which all players (CSPs, Network Equipment Providers, IT players, etc.) need to make now.

The growth of what we have termed Human Data (personal data for consumers and business customers, including some aspects of Enterprise Mobility), Non-Human Data (connection of devices and applications – Internet of Things, Machine2Machine, Infrastructure as a Service, and some Enterprise Mobility) and Digital Services (end-user and B2B2X enabling applications and services) requires CSPs and their partners to develop new skills, assets, partnerships, customer relationships and operating and financial models – a new business model.

As IBM found in moving from being hardware manufacturer to a services player during the 1990’s, transforming the business model is hard.  IBM was very close to bankruptcy in the early 90’s before disrupting itself and re-emerging as a dominant force again in recent years.  CSPs and NEPs, in particular, are now seeking to do the same and must act decisively from 2013-2016 if they are to enjoy a rebirth rather than continued and sustained decline.

Cisco, Microsoft, Google, AT&T, Telefonica, et al: the disruptive battle for value in communications

Technology: Products and Vendors’ Approaches

There are many vendors and products in the voice/telephony arena. Some started as pure voice products or solutions like Cisco Call Manager, while others such as Microsoft Office 365 started as an office productivity suite, to which voice and presence became a natural extension, and then later a central part of the core product functionality. We have included details on RCS, however RCS is not globally available, and is limited in its functionality compared to some of the other products listed here.

Unified Communications

Unified Communications (UC) is not a standard; there are many different interpretations, but there is a general consensus about what it means – the unification of voice, video, messaging, presence, conferencing, and collaboration into a simple integrated user experience.

UC is an important technology for enterprise customers, it brings mobility and agility to an organisation, improves communication and collaboration, adds a social element, and lowers costs by reducing the need for office space and multiple disparate communications systems each with their own management and control systems. UC can be delivered as a cloud service and has the acronym UCaaS. Leading providers are Microsoft, Google, and Cisco. Other players include IBM, 8X8, and a number of other smaller vendors, as well as telco equipment manufacturers such as Ericsson. We have covered some of the leading solutions in this report, and there are definite opportunities for telcos to collaborate with these vendors, adding integration with core services such as telephony and mobile data, as well as customer support and billing.

There are several elements for an enterprise to consider when developing a UC solution for it to be successful:

  • Fixed voice functions and needs (including PBX) and integration into a UC solution
  • Mobile voice – billing, call routing, integration with fixed and UC solutions
  • Desktop and mobile video calling
  • Collaboration tools (conferencing, video conferencing, desktop integration, desktop sharing etc.)
  • Desktop integration – how does the solution integrate with core productivity tools (Microsoft Office, Google Apps, OpenOffice etc?)
  • PC and mobile clients – can a mobile user participate in a video conference, share files
  • Instant messaging and social integration
  • How the user is able to interact with the system and how intuitive it is to use. This is sometimes called the user experience and is probably the most important aspect, as a good user experience promotes efficiency and end user satisfaction

From the user perspective, it would be desirable for the solution to include the basic elements shown in Figure 1.

Figure 1: Basic user needs from Unified Communications
Voice Messaging Tech Cover

Source: STL Partners

Historically, Enterprise communications has been an area where telcos have been a supplier to the enterprise – delivering voice end points (E.164 phone numbers and mobile devices), voice termination, and outgoing voice and data services.

Organisational voice communications (i.e. internal calling) has been an area of strength for companies like Cisco, Avaya, Nortel and others that have delivered on-premise solutions which offer sophisticated voice and video services. These have grown over the years to provide Instant Messaging (IM), desktop collaboration tools, and presence capabilities. PC clients often replace fixed phones, adding functionality, and can be used when out of the office. What these systems have lacked is deep integration with desktop office suites such as Microsoft Office, Google Apps, and Lotus Notes. Plug-ins or other tools can be used to integrate presence and voice, but the user experience is usually a compromise as different vendors are involved.

The big software vendors have also been active, with Microsoft and IBM adding video and telephony features, and Google building telephony and conferencing into its growing portfolio. Microsoft also acquired Skype and has delivered on its promise to integrate Skype with Lync. Meanwhile, Google has made a number of acquisitions in the video and voice arena like ON2, Global IP Solutions, and Grand Central. The technology from ON2 allows video to be compressed and sent over an Internet connection. Google is pushing the products from ON2 to be integrated into one of the next major disruptors – WebRTC.

Microsoft began including voice capability with its release of Office Communications Server (OCS) in 2007. An OCS user could send instant messages, make a voice call, or place a video call to another OCS user or group of users. Presence was directly integrated with Outlook and a separate product – Office Live Meeting – was used to collaborate. Although OCS included some Private Branch eXchange (PBX) features, few enterprises regarded it as having enough features or capability to replace existing systems from the likes of Cisco. With Office 365, Microsoft stepped up the game, adding a new user interface, enhanced telephony features, integrated collaboration, and multiple methods of deployment using Microsoft’s cloud, on premise, and service provider deployments.

 

  • Technology: Products and Vendors’ Approaches
  • Unified Communications
  • Microsoft Office 365 – building on enterprise software strengths
  • Skype – the popular international behemoth
  • Cisco – the incumbent enterprise giant
  • Google – everything browser-based
  • WebRTC – a major disruptive opportunity
  • Rich Communication Service (RCS) – too little too late?
  • Broadsoft – neat web integration
  • Twilio – integrate voice and SMS into applications
  • Tropo – telephony integration technology leader
  • Voxeo – a pathfinder in integration
  • Hypervoice –make voice a native web object
  • Calltrunk – makes calls searchable
  • Operator Voice and Messaging Services
  • Section Summary
  • Telco Case Studies
  • Vodafone – 360, One Net and RED
  • Telefonica – Digital, Tu Me, Tu Go, BlueVia, Free Wi-Fi
  • AT&T – VoIP, UC, Tropo, Watson
  • Section Summary
  • STL Partners and the Telco 2.0™ Initiative

 

  • Figure 1: Basic user needs from Unified Communications
  • Figure 2: Microsoft Lync 2013 client
  • Figure 3: Microsoft Lync telephony integration options
  • Figure 4: International Telephone and Skype Traffic 2005-2012
  • Figure 5: The Skype effect on international traffic
  • Figure 6: Voice call charging in USA
  • Figure 7: Google Voice call charging in USA
  • Figure 8: Google Voice call charging in Europe
  • Figure 9: Google outbound call rates
  • Figure 10: Calliflower beta support for WebRTC
  • Figure 11: Active individual user base for WebRTC, millions
  • Figure 12: Battery life compared for different services
  • Figure 13: Vodafone One Net Express call routing
  • Figure 14: Vodafone One Net Business Call routing
  • Figure 15: Enterprise is a significant part of Vodafone group revenue
  • Figure 16: Vodafone Red Bundles
  • Figure 17: Telefonica: Market Positioning Map, Q4 2012
  • Figure 18: US market in transition towards greater competition
  • Figure 19: Voice ARPU at AT&T, fixed and mobile
  • Figure 20: Industry Value is Concentrated at the Interfaces
  • Figure 21: Telco 2.0™ ‘two-sided’ telecoms business model